Glacier Water Announces Third Quarter 2012 Results

Glacier Water Services, Inc. (GWSV.pk) announced results for the third quarter ended September 30 th, 2012.

Brian McInerney, Chief Executive Officer of Glacier Water, said, “Our third quarter revenues increased 4.5% versus the same quarter last year and our year-to-date September 30, 2012 revenues increased 5.5%. Same-store revenues have increased 3.0% year-to-date. We continued to aggressively expand our network of machines across the U.S. and Canada adding more than 1,100 machines across multiple retail channels compared to one year ago. Our third quarter income from operations increased to $2,781,000 and was impacted by an investment in infrastructure to support our continued growth in both water and ice machine placements. These infrastructure costs are incurred in advance of the machine placements reaching maturity in revenue and profits. At the end of the third quarter, Glacier operated more than 21,500 machines located at retailers across the U.S. and Canada, providing high quality, great tasting drinking water and ice.”

Revenues for the third quarter ended September 30, 2012 increased 4.5% to $31,330,000 compared to $29,970,000 for the same quarter one year ago. For the nine-month period ended September 30, 2012, revenues increased 5.5% to $84,295,000 compared to $79,901,000 for the same period last year. Sales growth was driven by both same store productivity and the increase in machines on location.

The Company’s income from operations for the third quarter ended September 30, 2012 was $2,781,000 compared to $1,839,000 for the same period last year. For the nine-month period ended September 30, 2012, income from operations was $4,266,000 compared to $3,500,000 for the same period last year. Income from operations year-to-date was positively impacted by the margin generated from the increased revenues, offset in part by increased operating costs to support the growth in machines, and in particular, labor and benefits and vehicle costs. The prior year income from operations included expenses associated to the initial public offering effort of $960,000 and $1,135,000 for the third quarter and nine months year-to-date, respectively. Income from operations for the first nine months of 2012 and 2011 included non-cash compensation expense of $87,000 and $361,000, respectively.

The Company’s net income applicable to common stockholders for the quarter ended September 30, 2012 was $195,000 or $0.06 per basic and diluted share, compared to a net loss of $487,000, or $0.18 per basic and diluted share for the same period last year. For the nine-month period ended September 30, 2012, the net loss applicable to common stockholders was $3,404,000, or $1.04 per basic and diluted share, compared to a net loss of $3,378,000 or $1.24 per basic share and diluted share, for the same period last year.

In September 2012, the Company converted its U.S. operating subsidiary, GW Services Inc., from a corporation to a limited liability company (“GW Services, LLC”), enabling the Company to raise new equity. Initially, the Company raised $10,000,000 from a partnership made up of certain existing Company shareholders, in order to fund expansion of water vending and ice machine placements. The investors received $10,000,000 of Preferred Interests and 83,333 Common Membership Shares (2.39%) in GW Services, LLC. The Preferred Interests bear distributions at an annual rate equal to the one-year treasury rate plus 6%, distributable quarterly to the extent the Company has adequate cash flow. Subsequent to the third quarter on November 1, 2012, the Company raised an additional $5,000,000 from the same partnership in exchange for $5,000,000 of additional Preferred Interests and 34,420 Common Membership Shares (0.98%) in GW Services, LLC. The Preferred Interests may be redeemed at a premium amount by GW Services, LLC under certain conditions, including in the event of certain interest rate increases or liquidation.

Also subsequent to the third quarter, the Company amended its credit agreement with City National Bank in October 2012, increasing the amount available under the revolving facility to $50,000,000 through September 30, 2015. City National Bank is the Lead Arranger and Administrative Agent under the amended credit agreement with a second lender added to the facility. The amended credit agreement also includes an accordion feature allowing the Company to request an increase in the credit commitment up to an additional $25,000,000.

On October 26 2012, Glacier announced the completion of the acquisition of the assets of the Aqua Fill water vending business, which includes approximately 1,600 water vending machines in operation mainly in the western U.S., bringing the total number of machines in operation to more than 23,000.

With more than 23,000 machines located in 47 States throughout the United States and Canada, Glacier is the leading provider of high quality, low-priced drinking water dispensed to consumers through self-service bottled water machines located at supermarkets and other retail locations.

Statements in this announcement that are not purely historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.A copy of the Company’s audited financial statements for the year ended January 1, 2012 are available on the Company’s website, www.glacierwater.com, or can be obtained by contacting Steve Stringer at (760) 560-1111.

FINANCIAL RESULTS

GLACIER WATER SERVICES, INC.

GLACIER WATER SERVICES, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(In thousands, except share and per share data)

(Unaudited)

Three Months Ended

Nine Months Ended

October 2,

September 30,

October 2,

September 30,

2011

2012

2011

2012

Revenues

$

29,970

31,330

79,901

84,295

Cost of revenues:

Operating expenses

19,905

20,610

53,643

56,542

Depreciation and amortization

3,302

3,416

9,527

9,827

Total cost of revenues

23,207

24,026

63,170

66,369

Gross profit

6,763

7,304

16,731

17,926

Selling, general, and administrative expenses

4,924

4,523

13,231

13,660

Income from operations

1,839

2,781

3,500

4,266

Interest expense

2,314

2,574

6,843

7,637

Income (loss) before income taxes

(475

)

207

(3,343

)

(3,371

)

Income taxes expense

12

12

35

33

Net income (loss)

$

(487

)

195

(3,378

)

(3,404

)

Basic and diluted net income (loss) per share

Basic net income (loss) per share

$

(0.18

)

0.06

(1.24

)

(1.04

)

Weighted average shares used in calculation

2,720,048

3,276,482

2,720,048

3,276,286

Diluted net income (loss) per share

$

(0.18

)

0.06

(1.24

)

(1.04

)

Weighted average shares used in calculation

2,720,048

3,340,463

2,720,048

3,276,286

FINANCIAL RESULTS

GLACIER WATER SERVICES, INC.

GLACIER WATER SERVICES, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(In thousands, except share data)

(Unaudited)

January 1,

September 30,

Assets

2012

2012

Current assets:

Cash and cash equivalents

$

3,425

11,362

Accounts receivable, net of allowance for doubtful accounts

of $64 as of January 1, 2012 and September 30, 2012

1,777

2,113

Repair parts

3,934

4,285

Prepaid expenses and other

7,201

1,941

Total current assets

16,337

19,701

Property and equipment, net

53,896

60,696

Goodwill

7,080

7,515

Investment in Glacier Water Trust I Common Securities

2,629

2,629

Investment in Glacier Water Trust I Preferred Securities

3,648

3,648

Equity investment

1,000

1,000

Deferred financing costs, net

4,266

4,173

Other assets

872

773

Total assets

$

89,728

100,135

Liabilities and Stockholders’ Deficit

Current liabilities:

Accounts payable

$

2,715

2,452

Accrued commissions

4,026

4,941

Accrued liabilities

2,654

3,618

Bank overdraft

1,027

2,231

Total current liabilities

10,422

13,242

Junior subordinated debentures

87,629

87,629

Line of credit

32,056

33,500

Series B junior subordinated debentures

10,002

10,118

Long-term portion of deferred rent

121

150

Total liabilities

140,230

144,639

Commitments and contingencies

Stockholders’ deficit:

Preferred interests LLC investment

-

9,856

Preferred stock, $0.01 par value; Authorized 100,000 shares;

issued and outstanding, 0 shares at January 1, 2012 and September 30, 2012

-

-

Common stock, $0.01 par value. Authorized 10,000,000 shares,

issued and outstanding, 3,225,767 and 3,276,482 shares at

January 1, 2012 and September 30, 2012, respectively

49

50

Additional paid-in capital

24,153

23,602

Accumulated deficit

(42,500

)

(45,904

)

Treasury stock, at cost, 1,587,606 shares at January 1, 2012 and September 30, 2012